Due to the busy nature of many medical practices, planning for future events like physician succession or retirement often takes a back seat to other pressing priorities. However, planning for these changes can play a crucial role in equipping individual physicians and others in group practices with a successful environment for the future. “There are steps that can be taken to ensure that succession and retirement goes smoothly while not leaving medical practices in financial jeopardy,” says Jon-David Deeson, MSHA, MBA, FACHE, CMPE.
According to Deeson, medical practices hiring new physicians should be thinking about their exit before hiring someone. “When physicians are brought on board, an employment agreement should be thorough, spelling out all terms and defining next steps should physicians transition their role or move on from the practice,” he says. “Being unprepared with an exit strategy can leave practices in a bad spot.”
An important step in the planning process should be to classify the status of how physicians fit into a practice. “For example, new physicians will have different compensation, benefits, call responsibilities, and other contractual protocols for succession and retirement than senior physicians or those who are partners,” Deeson says. “By defining physician statuses in your practice, considerations can then be made for alternative agreements, if necessary. In some situations, physicians may want to go from being full-time to part-time status. In other cases, life circumstances can play a role, such as having a child or experiencing personal health issues. These scenarios should be set in advance how important components related to employment will be handled.”
Deeson notes that it is important to be clear and detailed when creating employment contracts. “It’s important to factor in variables like bonus dollars, ancillary income, benefits, on-call obligations, length of employment arrangements, and other financial issues,” he says.
There is a series of steps to take for retirement pre-planning that should be conducted systematically. “With proper communication and clear contracts, this pre-planning can give practices a better opportunity for a smooth transition,” Deeson says. As timelines shorten, practice managers should discuss changes in compensation, such as a fixed salary rather than one based on productivity.
A Roadmap to Success
Developing documentation that outlines all the physician statuses at a practice, defines key elements and arrangements, and spells out a periodic timeframe for review is paramount. “These documents should be revisited regularly, especially for physicians who have alternative arrangements,” says Deeson. “This step can help ensure practices are prepared to accommodate or say no to special circumstances or requests physicians make outside of the traditional full-time, partner physician track.”
Deeson says it is critical to find a balance between the best interests of the practice and the individual physicians who work for it. “There needs to be a discipline in place to review all arrangements within the practice so the emotions that come with the requests for such changes can be removed,” he says. “By establishing these standards, practices can set the tone for an orderly transition and remove potential outside influences that can make these changes challenging.”
Readings & Resources (click to view)
For more information on this topic from Jon-David Deeson, MSHA, MBA, FACHE, CMPE, go to: http://www.physicianspractice.com/successful-exit-planning-physicians.